Mr. HAYDEN. My judgment would be that the Secretary of the Interior in proceeding under this bill would not attempt to sell the bonds of the East Mesa district first. The completed plan, as you know, contemplates the irrigation of about as large an additional area as is now contained in the existing irrigation district, that is, an additional 400,000 acres.

Mr. WELLING. Yes.

Mr. HAYDEN. There being in existence a going concern, the Imperial irrigation district, with productive farms and lands, with values that greatly exceed the amount of the bonds that are to be issued, it will, of course, be better business for the Secretary to call upon that district, having apportioned the cost that the district shall pay, to issue its bonds first. He will dispose of those bonds first and proceed with the work. Enough money can be derived from the bonds of the existing Imperial and Coachella irrigation districts to complete half or more than half of the work.

Now, when the work is half or more than half completed, that means that the all-American canal has been constructed to a point where the lands on the east mesa are capable of being served with water. At that time, if additional irrigation districts are organized to include the lands on the east mesa and their bonds are placed upon the market, the Secretary of the Interior can say, "With the proceeds of these additional bonds I propose to continue the main canal and laterals and cover this mesa land so it will be placed in cultivation in the very near future." The bonds of the new district will then be very much more attractive than to attempt to sell them now when, as everybody realizes, three or four years must elapse, perhaps longer, before water can be placed upon the land.

Mr. WELLING. Assuming that H. R. 11553 becomes a law, how much money do you think the Government of the United States would have to advance to the Imperial irrigation project before its bonds could be marketed?

Mr. HAYDEN. My judgment is that if this bill passes and Congress makes an initial appropriation, which would commit the Government to the work, that from then on there would be no difficulty in disposing of the bonds at par.

Mr. LITTLE. Are you in favor of the bill?

Mr. HAYDEN. I am in favor of H. R. 11553, to which I have devoted some weeks of time in preparing for the consideration of this committee.

Mr. LITTLE. You were on the subcommittee?

Mr. HAYDEN. Yes; and I have just suggested, Mr. Little, that the orderly way to proceed is to permit a representative of the Imperial Valley to take up this bill section by section and tell the committee what is in it. After we find out what is in the bill we can all discuss it intelligently. There is apparently much confusion in the minds. of the committee about three or four different bills which some of the members have not taken the time to read and study.

Mr. LITTLE. I will have to go now to attend a meeting of the Claims Committee, but this suggestion you make appeals to me as being the proper way to do it, and I will keep track of whatever is said here to-day.

Mr. HAYDEN. If you will be kind enough to read the hearings so that you can get a connected idea of what the plan is I am sure that we can depend on your support.

Mr. LITTLE. It appeals to me as the satisfactory way to do it.

Mr. HAYDEN. Unless some members of the committee want to ask further questions, that is all I have to say at present.

Mr. WELLING. How much would that initial appropriation be, in your judgment, Mr. Hayden?

Mr. HAYDEN. I think that an appropriation to cover such a sum of money as might be estimated by Mr. Davis for the work that the Reclamation Service could do in the first fiscal year, say three or four million dollars, would be ample. All that the bond buyer wants to know is that the Government of the United States approves of this project and that if the works are constructed as proposed in this bill, a successful irrigation district will be created which can pay its bonds.

am making a conservative statement when I say that it might be necessary for the Government to make an initial appropriation. Beyond that I do not believe any further appropriations will be necessary. The representatives of the Imperial irrigation district say that they have presented to them now, by leading bond-buying concerns on the Pacific coast, the positive assurance that they will purchase these bonds at par from the very beginning without asking Congress to make any appropriation at all.

The CHAIRMAN. That is on the terms that they make the interest 5 per cent.

Mr. HAYDEN. We can increase the rate of interest as provided in the bill. The people of the Imperial Valley are willing to pay a little higher rate of interest. That is their concern and it can be financed in that way. You understand this bill does not carry an appropriation.

Mr. SMITH of Idaho. Of course, it does not carry any appropriation from this committee.

Mr. HAYDEN. I understand that. The bill carries authority to make appropriations. Now, if the bond buyer ascertains-and this is the view of the people representing the Imperial irrigation district that the two Houses of Congress and the President of the United States have approved the plan; then they say from then on the financing is easy.

Mr. WELLING. Then you might just as well leave out any reference to the Government authorizing an appropriation.

Mr. HAYDEN. To do so would destroy the whole theory upon which the bill is based, because the plan is that the bonds that are issued by the irrigation districts are to assure the United States that any expenditures which it may make will be repaid.

The CHAIRMAN. That is why the Imperial Valley people have come here, to get the recognition of the Government. They haven't had that. They want it and they need such recognition, and as soon as they get it, that the money is going to be carefully expended under the supervision, under the absolute control and administration of the Reclamation Service, it will settle the question that the money is going to be used honestly for the purpose intended, and this will give the proposition standing.

Mr. WELLING. You don't understand, though, that there is an offer of the bond buyers, a bona fide offer? It is mostly up in the air yet.

The CHAIRMAN. Perhaps tentative. The thing that I am interested in here is that it is a good-faith offer. It has not been presented here, of course.

Mr. HAYDEN. I do not want you to take my word, because I am giving you secondhand information, but when Mr. Kibbey appears before the committee he can elaborate the financial details. The fact, as indicated by the chairman, is that but for the inability of the Imperial irrigation district to sell its bonds at par, they would not come to Congress asking for this legislation. They now have a contract with the Secretary of the Interior authorizing the construction of the all-American canal, to do the work themselves, but when they try to finance the scheme under the existing conditions, they find that they must sell their bonds below par and suffer a great loss, running into the hundreds of thousands of dollars, because the bond buyers, the people who would purchase their securities, say: "We do not know anything beyond what you say about the feasibility of your scheme. We do not know who you are going to employ to do the work; we do not know whether the money is going to be properly expended and that you will get results for your money that you should."

Now, if the Secretary of the Interior is given authority, as he is in this bill, to apportion the cost among the various districts, which somebody would have to do in order to unify them--if he declares the project feasible-if he is given authority to do the work; if the title to the works remain in the United States, it places the people of Imperial Valley in a vastly improved situation in selling their bonds, because the project will then have the engineering O. K. of the United States. The bill does not guarantee that the taxpayers of the United States will pay these bonds; no such thing is contemplated. The United States assumes no direct financial responsibility.

Mr. WELLING. Suppose the engineers of the Interior Department would make a very considerable mistake amounting to $10,000,000 in the cost of the project; it would be that much more than the people of the Imperial Valley, or the people who purchased the bonds, believed it would, wouldn't the Government be under a moral obligation to make that good?

Mr. HAYDEN. No; we have made it perfectly clear that the people of the Imperial Valley and the adjoining districts assume an obligation to pay every cent of the cost of construction regardless of any estimate. We are not going to make the same mistake that was made under other reclamation projects where a promise was held out to the people that the project would be completed for a certain sum of money, and then changed conditions or poor engineering-whatever the excuse might be led to an increased expenditure. It is distinctly understood that the people of the Imperial Valley and the adjacent irrigation districts will assume an obligation to pay every cent of the cost of the project regardless of what that cost may be, and there is not the least doubt about their ability to pay it. They now have a crop production on one-half the area of the land to be

irrigated which is almost equal each year to the total sum of money to be expended, doubling the area of that land will produce more every year than the total cost of these works, so why should anybody be afraid that the farmers will not meet their obligations?

I would like to have Mr. Kibbey take the bill and give us an explanation in his own way of its purposes. He has been here for some months devoting his entire time to this subject and is thoroughly familiar with it. He knows the reason for everything that is in this bill, and you could not get a better authority to explain it.

STATEMENT OF MR. WALTER B. KIBBEY, REPRESENTING THE IMPERIAL IRRIGATION DISTRICT.

Mr. KIBBEY. Right along the financial question that has been raised here, I wanted to say that as long as that has been discussed, the Imperial irrigation district is willing to put up the money by contract with the Secretary of the Interior which will be necessary in making the estimates which are required under the bill, as you will see as I compare it, in order to carry the expense to the time when the first issue of Imperial irrigation district bonds can be issued. When those bonds can be issued, I will say, as Mr. Hayden has suggested, that Mr. Gavin McNab, the attorney for the Anglo-American Bank, of San Francisco, was sent to us, to our committee; he stated that if an appropriation was authorized in the bill that Mr. Fleishhacker, the president of that bank, authorized him to state to us that if we would increase our rate of interest to 5 per cent he would take the bonds as issued at par.

Mr. HAYDEN. Has the Anglo-American Bank purchased any bonds of the Imperial irrigation district heretofore?

Mr. KIBBEY. I don't know. Mr. Fleishhacker personally is the owner of lands in the Imperial Valley. He is president of one of the largest banks on the Pacific coast.

Mr. BARBOUR. What is the capitalization of that bank?
Mr. KIBBEY. I don't know. It is a very large bank.

Mr. HAYDEN. I am advised by Dr. Mead that this bank has been the largest purchaser of the bonds of the Imperial irrigation district. Mr. MEAD. These bonds have all been purchased by California banks. As I understand it, they have been underwritten by two banks, and this bank is one of the underwriters and is the principal purchaser of the bonds that have been sold heretofore. There are some $8,000,000 of bonds that have been bought, and those bonds are being sold in California to-day-bought by the general public, just like any other irrigation-district bonds, and at about the same price. The CHAIRMAN. At what price?

Mr. MEAD. Very close to par.

The CHAIRMAN. They will be worth par at once, and they would bring the entire amount of money.

Mr. BARBOUR. Some of the older district 5 per cent bonds are selling at par now, and all of them are very close to par.

Mr. KIBBEY. Now, Mr. Kettner will appear before you again, and he will make the statement that New York representatives came to him and made the same statement with reference to the rate of interest and the salability of the bonds.

The CHAIRMAN. That is, 5 per cent?

Mr. KETTNER. Five and a half per cent; yes.

Mr. SMITH of Idaho. Of course, Mr. Kibbey, if you expect this committee and Congress to seriously consider this proposition, the bonding companies should put the statements in writing instead of passing them around by word of mouth and expecting Congress to act on them.

Mr. KIBBEY. I assume they will not do it. I do not assume that any bonding company will bid for bonds before they are issued, with no certainty of getting them and with a changeable market. We are talking about the market conditions at this time. Under the law the bonds must be sold to the highest bidder when offered for sale, unless all bids are rejected.

Mr. SMITH of Idaho. Will they come before the committee and make a statement?

Mr. KIBBEY. Mr. Fleishacker lives in San Francisco. Mr. McNab was here and came to our committee, but he had to leave. I did not assume that there would be any question about my statement. wire to Mr. McNab.

I can

Mr. SMITH of Idaho. You have not only to convince the members of this committee, but we have to convince the Members of the House and the Senate. We do not doubt your assertion that they have made such statements, but it seems to me we should have something more tangible than a mere verbal statement that has been passed around, a mere rumor.

Mr. KIBBEY. I thought it was tangible when we were offering on the part of the Imperial Valley to put up the money necessary to carry the expense where the bonds could be issued. A tangible statement, if you desire one, will be that we will assure you that no appropriation will be asked of the present Congress.

Mr. SMITH of Idaho. Well, if you are going to modify the bill to that effect, that is a different proposition.

Mr. KIBBEY. Now, Mr. McNab said, and so did the others, that we must have an authorization for an appropriation in this bill to give, confidence in the bonds themselves and that is what is desired, confidence. The only obligation, as I understand it, upon Congress to appropriate money after the passage of this bill is purely a moral obligation; there is no legal obligation upon Congress, as I understand it, to appropriate money within any definite term. We know of authorizations where years and years have elapsed before money was actually appropriated. That is left entirely with Congress.

Mr. SMITH of Idaho. Certainly.

Mr. KIBBEY. Now then, if we release you from that moral obligation to appropriate during the present crisis, which we can do by our statements and, if necessary, I can get the full board of directors of the Imperial irrigation district to come here and make their statements that we will not ask you for one dollar in the present Congress; that the Imperial irrigation district will, by contract with the Secretary of the Interior, finance the proposition up until the time when the bonds can be issued of that district. Now, when the bonds of the Imperial irrigation district are issued, and if they